Tuesday, April 3, 2018

Why is climate change hard to solve? - V

(Fifth in a series; Parts I, II, III, and IV)

The previous installment looked at the strong trend toward increasing efficiency, measured as tonnes of oil equivalent per million dollars (with 2016 purchasing power) of GDP, or toe / million $ GDP.

Today’s post, like yesterday’s looks at the paths of individual countries over time, but with a slightly different metric, in order to examine the concept of “decoupling.”

Figure 1 shows Norway and Switzerland. Both countries have paths that start off by rising to the right: as they are getting richer, they are also using more energy. But each one also hits a point where that trend stops.
Figure 1. Data from BP Statistical Review and Penn World Tables. More here

Norway’s rise slows after 1990, and since 2000 it’s energy use (per capita) has declined somewhat (with some pretty large year-to-year fluctuations).

Switzerland’s rise stops in 1986, and the country’s energy use has trended very slightly downward since then.

Figure 2 shows three more wealthy countries. Germany’s rising energy use slowed after 1974 and then turned into slow decline (like Switzerland’s) after 1985.
Figure 2. Data from BP Statistical Review and Penn World Tables. More here

Canada’s rise slowed after 1977, slowed further after 1996, and has fallen noticeably since 2005.

The U.S. hit its all-time peak in 1973 (the year of the Arab oil embargo), then hit a trough in 1982, before climbing slowly back to a secondary peak in 2000. The recession of 2007-09 pulled energy use back down, and by 2014 it had not moved back up from that lower level.

These paths that are flat or slightly declining are illustrations of a concept known as “decoupling.”

A comparison of energy use and GDP across different countries shows that energy use and GDP are correlated (see Part I). And there are various ways of showing that the link is likely causal, from energy use to GDP (for one such argument, see Part II).

In the 1970’s, examination of individual countries over time also suggested this link, because as countries grew richer, they also used more energy (see the early, rising parts of the five paths shown so far). This sense was reinforced by the linkage in the 1970’s between reduced energy use and reduced GDP. For example, see what happens to the U.S. in Figure 2 for the two years after 1973: energy use falls, and GDP goes down, so the path tracks down to the left, almost retracing its course upward to the right from 1971 to 1973.

But by now, all five of these countries have gone a minimum of 14 years (Norway) to a maximum of 41 years (the U.S.) during which time GDP has increased substantially, while energy use has somewhat decreased.

In the case of the U.S., our GDP per capita just about doubled from 1973 to 2014 (and that’s in real terms, so it’s not simply inflation), while its energy use has fallen by about 12%.

This is “decoupling.” GDP growth is now decoupled from energy use, so we can have more GDP without needing more energy.

Partly it’s more efficient cars and machines.

Partly it’s a continuing shift from the production of goods to the production of services in terms of their relative importance in GDP.

It can even be a shift in political systems, as shown in Figures 3 and 4.
Figure 3. Data from BP Statistical Review and Penn World Tables. More here

In Figure 3, the Czech Republic has a moderate post-communist recession from 1990 to 1992, then returns to growth at a lower level of GDP.

Lithuania has a far more dramatic fall in energy use, and a longer recession (through 1994), then returns to economic growth at its lower energy level.

In Figure 4, Russia experiences an 8-year decline in GDP (!!), from 1990 to 1998, along with a significant decrease in energy use. Renewed economic growth is accompanied by renewed increase in energy use, but at a slower pace than the earlier decrease, so Russia seems to have moved to a new path.

Slovakia’s experience was much like Czechia’s.
Figure 4. Data from BP Statistical Review and Penn World Tables. More here

Poland saw a large drop in energy use with its post-communist recession, and then has continued with basically flat energy use since 1991.

Hungary has seen the least change with the end of communism, but it was often regarded as the Soviet-bloc country with the most use of market mechanisms.

So we have decoupling for technological reasons (better machinery), economic reasons (shift to the service sector) and political reasons (the end of communist rule).

Figure 5 shows Turkey and Mexico (which were also paired in the previous post). Their growth in energy use has slowed, but is showing no signs yet of stopping.
Figure 5. Data from BP Statistical Review and Penn World Tables. More here
Figure 6 shows Bangladesh, China, India, and Indonesia. It’s true that Indonesia saw a decline from 2013 to 2014, and its earlier increase had been slow since 2003, but it hasn’t clearly started a downward trend, and the other three countries are still increasing their use.
Figure 6. Data from BP Statistical Review and Penn World Tables. More here
Note that the poor countries, though they’re still generally increasing their energy use, are still at much lower levels of energy use than the rich countries. I’ve adjusted the axes on each chart to make it easier to see what’s going on, but if I place a different mix of these countries on a single figure, as in Figure 7, you can see that the poorer countries are using much less energy (as you would expect from Part I, which showed the strong correlation between energy use and GDP).
Figure 7. Data from BP Statistical Review and Penn World Tables. More here
So, in rich countries we see decoupling of GDP from energy growth, while in poor and middle-income countries that phenomenon is harder to find.

And that makes a lot of sense, because it should be easier for a rich country to decouple than for a poor one.

In rich countries you already have high rates of car ownership and even of such basic amenities as indoor plumbing. Most families are already in their own apartments or houses, and people are already eating substantial amounts of animal-derived foods (meat and dairy). There’s always room to consume more goods, but some of that will be in high-tech devices, and some of it will be in services. And the things we already have, like cars and houses, can be made more efficient. There’s even room for people to move to smaller apartments and a car-free lifestyle, as some young adults are doing.

In poor countries, car ownership is low, so as people get richer, they buy more cars.

Indoor plumbing is far from universal, so with greater wealth people arrange for running water.

Families are often crowded into shared housing, or extremely cramped housing, and so wealth is turned into more comfortable accommodations.

Diets are very low in animal-based foods, so people eat more meat and dairy.

All of these shifts increase a country’s energy use.

And all of that makes it no surprise that we have a widespread phenomenon of decoupling among rich countries already using large amounts of energy, with little or no such behavior among poor and middle-income countries still using relatively little energy.

Next time, the prospects of improving on an energy efficiency of 50 toe per million $ of GDP.

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